At first glance, the private equity market might not look like a greener employment pasture for finance executives. An analysis by Mercer Management Consulting Inc. of leveraged buyout portfolios shows 50 to 60 percent of private equity funds that invested heavily between 1998 and 2000 would have negative returns if currently marked to market. But poor performance may represent a golden opportunity for financial executives sick of public companies
With portfolio companies underperforming, much of existing management is walking away, leaving a serious skill shortage, particularly in the financial areas. Private equity fund partners often help out during the start-up phase, but with anywhere from 5 to 10 companies to manage, there are limits. "A typical partner doesn't have time to turn around a distressed company," notes Parson Group LLC's Dan Weinfurter. "Just attending the board meetings of all their portfolio companies is a full- time job."
Instead, funds typically look to bring in help--and CFOs top the list. "Financial management is usually the weak link at portfolio companies," says Parthenon Capital CFO Terry Chvisuk. "That's where equity funds spend the most recruiting dollars." But what's the attraction for recruits?
For starters, says Chvisuk, it's often a chance for top-notch controllers to don the CFO title. And there's a payout for guiding a company to a successful exit within a defined time frame. Mercer vice president Neal Pomroy points out that one success often leads to another. "Once you are in the family of some of these active funds, it can be a very rewarding career," he says. Also, "there's a professional rush to be had for a CFO who works in that kind of environment, where the amount of debt puts a premium on speed, execution, and risk-taking," agrees Peter C. Jeton, CFO of Boston-based Heritage Partners Inc., a buyout fund specializing in family-owned businesses.
And for former CFOs of public companies, private equity has an added attraction. "These guys are in seventh heaven not having to deal with analysts and ongoing public reporting," says Chvisuk. --Tim Reason